How Real Estate Investors Make Money

How Real Estate Investors Make Money

Introduction

There are two ways investors make money in real estate: renting and selling for profit. Of course, the savvy investor can use both methods, even on the same property. Here we will go over some details of each method.

It should be emphasized that whether renting out a property or selling for raw profit, the importance of location can’t be overemphasized. The fact is that nearly any model of residential or commercial building can be replicated in many locations. However, the local amenities, culture, atmosphere, weather, or historical value cannot be duplicated. It is such factors that give rise to widely different prices and rents for otherwise identical structures.

Cash Flow: Rent

When renting, the first priority is attracting and retaining tenants. Generally, home-like rental properties or long-term commercial leases are a better option than short-term rentals that, admittedly, fetch a comparatively higher monthly rental. This is because vacancies take their toll and are bad for cash flow. Make sure to specify clear lines of responsibilities for tenants and the property owner. Maintenance, repairs, utilities and tax responsibilities accrue as costs to the property owner, so make sure that rental cash flow at least matches maintenance and other necessary expenditures.

Fix and Flip

Buying low and selling high is the holy script of investing. When buying real estate, beware that the purchase price essentially traps liquidity upon sale completion and for as long as it takes to renovate and resell the house. Also consider the opportunity cost of other income-producing activities, including renting, that the property owner could be doing. Such opportunity costs can add up, but if the buyer were to completely outsource the “fix” to others, the added cost would reduce or even eliminate the profit margin upon resale.

Summary

Note that both methods of making money from real estate entail unexpected costs along the way. Vacancies, irresponsible and toxic tenants, as well as competing units can take the steam out of anticipated cash flow from rental properties. Costly repairs, illiquid funds, and all-in marketing and resale costs can deflate profit margin from fix-and-flip properties. Consider the time and expertise required for each investment method and pick whatever works best. Real estate can be lucrative, but is not risk-free.

Is Airbnb Affecting the Housing Market?

Is Airbnb Affecting the Housing Market?

With more and more people flocking to popular towns and cities, combined with the increase of all things digital, Airbnb is a company that couldn’t have arrived at a better time in the digital age. In fact, there really wasn’t another time where Airbnb could have thrived in the way it does now. And while it has helped countless people make their vacations more affordable, as well as benefit those renting out their own properties, is it possible that this app has also brought some trouble to the real estate market along the way?

Property Owners are Catching On

Property owners are concentrated on buying properties in cities that draw large crowds of tourists. You may be wondering where Airbnb ties into this statement, but this is where it gets interesting. Current property owners and people looking to purchase property to rent out have grown keen to the fact that Airbnb can be a helpful indicator of places that are seeing a booming influx of visitors, which in turn signals to property owners that their city may very well be a hot commodity for all things hipsterdom and tourism

So, what has happened as a result is that many property owners are beginning to raise the prices of their rental properties in an attempt to capitalize on a bustling metropolitan area. Also, current property owners in cities where this is occurring are also optimistic as it provides them with a chance to sell for a much higher price than they bought.

Growing Competition

Airbnb rental properties can be money-making machines. If you operate an Airbnb in a sought-after travel destination, you are likely to acquire a continual, large-sum of revenue each year. With this in mind, property owners have opted for renting their spaces out short-term for the whole year as opposed to on a long-term basis (short-term means more money). Now, since long-term rentals are becoming increasingly less available, this has pushed property owners into a heightened sense of competition, which in turn causes prices to go up due to demand.

Airbnb is a great tool for people looking for places to stay while vacationing and for people looking to make some extra profit. But if the invisible hand of Airbnb continues to increase the prices of the housing market, we may be headed for a destination that no one wants. The conversation on how to create and maintain sustainable housing costs while allowing people to continue their ventures on Airbnb is a dialogue that is certainly worth having, both for the tourists, locals, and property owners.

Why Your House Flipping Flops

Why Your House Flipping Flops

House-flipping has become a trendy and exciting career for many hungry professionals looking to establish themselves in the housing/real estate market. But in an attempt to chase after a truly promising career, far too many people repeat the same mistakes.

To help remedy the recurring problems that come along with house-flipping, below are two all too common pitfalls that seem to perpetually plague real estate moguls longing to turn a passion into a paid project.

What is Flipping?

First, we need to establish what constitutes “house-flipping” in the first place. “Flipping” is a type of real estate strategy in which the buyer purchases a house for the sole purpose of renovating and selling the property. The way that profit is made in this business is by purchasing low and selling high.

For instance, investors who flip properties might buy a property in an especially “hot” market, renovate it, and then sell it at a price that makes sense with its newly added, state-of-the-art upgrades. This is also where the true work comes in, too. House-flipping doesn’t just require smart investment purchases, it also requires home renovation and remodeling skill.

Mistake #1: Poor Time-Management

Renovating and flipping can often be a time-consuming business. Not only do you need to find a property, but you have to have enough time built into your project to account for inspections. After that, of course, you need to play the waiting game that comes along with listing. It takes a lot of confidence in your skill to be patient through this whole process, especially if your goal is to make enough money to at least break even.

Mistake #2: Not Enough Skills

House-flipping isn’t easy, and the competition is certainly present. Many skilled plumbers and carpenters often flip houses as a side project. If you desire to excel in the industry, there’s a lot more to it than buying low, taking a sledgehammer to the bathroom, and listing it on the market. Like it or not, the real money in the house-flipping industry comes from what the professionals call sweat equity. If you’re comfortable (and skilled) with a hammer, hanging drywall, and laying a carpet, then you just may have what it takes to make it in the house-flipping industry.

In the end, patience and hard-work are equally as important as any other skill in the house-flipping industry. If house-flipping is a passion of yours, then going into the industry with research and guidance is imperative. It won’t be easy, but with the dedication needed to accomplish the task at hand, house-flipping and renovation can be a great career full of excitement and fulfillment.

Habits of Successful Real Estate Agents: Part 1

Habits of Successful Real Estate Agents: Part 1

A real estate agent possesses one of the most valuable service roles in the world, helping people find their homes. For many, it is the first time they are making such a large investment or purchase. This being said, it is up to the realtor to guide and educate them throughout the process. As a Realtor, there are many keys to obtaining a successful career but few will go the extra lengths to achieve this. Advancing your career is smooth if you start every day and consider these habits.

 

Effective Communication

 

As a real estate agent, you likely have a very flexible schedule. As you are in the service industry, it is important to remember that your client’s needs come first. In order to ensure them that they are in capable hands, being an effective communicator is crucial. Promptly responding to calls and emails is necessary for this industry. Good communication with clients, instills their trust in you during one of the most challenging decisions of their lives. It is especially important for a realtor to always be available for first time home buyers. They are likely to have many questions and need intricate details about certain processes. Having sympathy for a client’s needs is something a successful real estate agent must have.

 

Knowledgeable

 

When you initially become a real estate agent, the learning curve can be steep. As you progress in your role, keeping up with new real estate trends helps advance you amongst your peers. Additionally, knowing details about the various neighborhoods in your area presents you in a better light to your clients. No one expects realtors to know everything about the industry. But, being willing to  find the answers to anything unknown, shows your passion and willingness to learn to your peers and clients. Having the proper resources and network to rely on is an essential part of excelling in this industry. As in most professions, real estate has a huge potential for growth and learning. Realtors should always be looking to further their knowledge within the industry. They are not only helping themselves and their future clients.

 

Check back for more of Shawn Boday’s tips on habits for successful real estate agents!

 

Preparing Your Home for a Real Estate Photo Session

Preparing Your Home for a Real Estate Photo Session

kitchen interior

There is no doubt that having a successful real estate photo shoot for a new apartment or home you are trying to sell can be a really tricky situation. Too often photos are dark, from a strange angle, or simply fails to capture the beauty or attractiveness of the home in general.

With newer, more centralized real estate platforms such as Trulia and Zillow becoming increasingly common for agents across the country, better images are now the norm for home buyers in the digital world. Below are some ways to maximize appeal for any company on the market.

  1. Make the beds with linens that complement the colors of the room and overall interior.
  2. Clean the house: get the carpet shampooed, vacuum and mop all hardwood floors to make everything as clean as possible/visually appealing to any homebuyer’s eye.
  3. Don’t forget to clean the bathrooms!
  4. Make sure there is maximum natural and in house lighting before anyone comes to view the house or apartment.
  5. Remove all traces of personalized paraphernalia throughout the home so visitors can envision it as their own.
  6. Take the time to put away all cleaning supplies in the kitchen.
  7. Double check the house to see if everything has been put away in an orderly fashion.

The trickier part is definitely getting in touch and figuring out which real estate photographer is the best fit for you. Do bear in mind that photography fees vary according to experience, location and how large the property is. Connecting and meeting with various photographers is the best way to discern which professional you’d like to work with.

After the photos are taken, Chris Palmer the president of PhotoUp takes pride in the editing work his team is crafting. He has recently told the Huffington Post that “We’re the only ones out there doing this transparently, and real estate happens to be our niche. We have a team in the Philippines that work in a Google-like office. It’s a very creative environment. We find great ways to impact the photographers and the communities in which we work.”